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Venezuela Crisis: Will the US Target Oil Exports?



  Oil Factory

Image Caption
Getty Images

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The oil industry in Venezuela is an important source of money for the government

In their fight against Venezuelan President Nicolás Maduro's reign, the United States has sought to hamper the government's ability to secure money and govern the country ̵

1; with sanctions imposed on officials, some sectors of the economy and the official cryptocurrency are directed.

So far, however, it has not used what many refer to as a "nuclear option" – a complete oil embargo targeting the industry, which accounts for 90% of government revenue.

Despite the rhetoric between Nicolás Maduro and President Donald Trump, refineries in the US, Venezuelan oil is still buying. The Venezuelan state-owned company PDVSA even owns refineries in Texas through a subsidiary called CITGO.

But with the escalation of the crisis after Washington backed opposition leader Juan Guaidó to the presidency last week, a new round of sanctions is expected in the coming days. 19659007] On Saturday, US Secretary of State Mike Pompeo could not protect himself from the UN Security Council against Venezuela, as China and Russia are close Maduro allies.

President Maduro resigned his call for US diplomats to leave the country. Both countries now have a 30-day window to negotiate the new terms of their relationship.

Markets are now watching what the US will do next. Despite its failure in the Security Council, the Trump government is supported by large regional players such as Brazil, Argentina and Colombia.

If she finally turns against Venezuelan oil, could that be the nail in the casket of the country's oil industry, which has been in crisis for years? And what could that have for the rest of the world?

Markets Nervous

A boom in US shale production has helped lower crude oil prices over the past four years, although they have recovered somewhat.

But it's 2019 It's not a clear indication of where prices are heading.

However, oil is never a predictable business, and there are many situations where price spikes could occur. The production in Nigeria and Libya is very volatile. Iran is under a serious US embargo. Russia and Saudi Arabia cut production.

After all, there is a risk of a global economic slowdown that could drive up prices by reducing demand.

The crisis in Venezuela is another scenario closely watched by oil analysts. 19659020] Copyright
AFP

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The Venezuelans fled the country as economic hardship worsened

There is a general feeling in markets that Nicolás Maduro will not come to power in the near future and tensions will continue to rise. Also, most analysts reject the full "nuclear option" as it would have a devastating effect on the Venezuelan population rather than just beating the government.

One of the most likely scenarios is the partial restriction of the amount of oil USA can buy in Venezuela.

That would hurt consumers in America and the rest of the world. Prices would rise as refineries would have to source their oil from more expensive sources. American refineries shopping in Venezuela would also be affected.

But the US restrictions would benefit Saudi Arabia, Mexico, and Iraq – countries that also produce the same sort of heavy crude oil (Canada also produces heavy crude oil, but without logistics.) Ability to increase its exports) , These countries have eaten Venezuela's market share for years.

The world's largest reserves

Venezuela would obviously be the biggest loser of all.

The country has the largest proven oil reserves in the world – even bigger than Saudi Arabia Arabia – but it soon runs out of money to search for oil and pump it out of the ground.

In the late 1990s, Venezuela produced more than three million barrels of oil per day. According to experts, today's edition moves above the one million mark.

Image copyright
AFP

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Juan Guaidó has declared himself interim president

Even without international sanctions, Venezuela's oil production will fall dramatically this year due to lack of investment.

The decline in production has been stronger in recent months.

Helima Croft of RBC Capital Markets forecasts that production will fall 300,000 to 500,000 barrels per day this year without sanctions.

Restrictions from Washington would accelerate the decline. Venezuela would be able to relocate part of its output to other buying countries, such as China, but it could not transfer all its surplus oil to markets that are not compatible with the US.

"Escape in droves"

Venezuela is still considered to be an oil power plant, mainly because it produces heavy crude oil, a variety that is not widely distributed in the world.

But the severity of the economic crisis can 19659007] "Billions in investment will be needed to repair the infrastructure and start a recovery. The talented technocrats who once made PDVSA one of the leading national oil companies are still fleeing in droves, "she told the BBC.

" Even when a reformist government comes to power, the international community must make great efforts to rebuild and rebuild to rehabilitate to get the country back on its feet. "

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EPA

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President Nicolás Maduro has resisted calls to withdraw

The IMF now publishes separate indicators for Venezuela in its Latin American analysis. The economy there has become an outlier, so it makes no sense to compare it with other countries.

This year, Venezuela's GDP is expected to hit a new low: the economy will be half the size of 2013. [19659007] Last year, the government again tried to use oil to solve its economic problems. She ended the subsidies, increased domestic fuel prices and increased her campaign to use a cryptocurrency allegedly tied to oil drums.

Inflation, which should have exceeded the million-percent mark, could not limit it But do not end the lack of food and medicines.

It is hard to imagine that life becomes more difficult for the people of Venezuela. Now with new sanctions on the cards it can be straight.


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